Previously, I discussed that trade wars and wet weather conditions have generated uncertainty in the agricultural industry. Since the publication of my last blog, projections for direct farm payments have soared. Now, ag economists are predicting that direct farm payments will be at the highest levels in a decade. Furthermore, unprecedented wet weather has led to more than $1 billion in insurance claims for acres that farmers were prevented from planting. It is projected that direct payments will account for 27% of farm income in 2019, with a significant portion (62%) coming from trade mitigation payments.
Despite higher commodity prices, the ag economy has continued to struggle. Working capital levels have continued to decline, and has reached critically low levels, indicating serious concern about the financial health of the agriculture industry. Although the announcement of a second round of trade war mitigation payments comes at a good time, it is an indication that the trade war is likely to continue. Given the turmoil in the ag industry it is extremely important to ensure that agricultural loans have been properly secured. There are special rules for securing crop insurance and direct farm program payments.
Read more here on why it is important to conduct file reviews and ensure best practices are being utilized to secure a lender’s collateral position in farm program payments and crop insurance proceeds